It’s all about rail, baby

We’ve mentioned this before.  Frac sand is all about rail.  If your mine is right on a railroad spur, transportation costs are lower.  A lot lower.  Now there’s a credible article that puts a number on how much lower.

Up to $10/ton.

So you farmers who are being pulled into frac sand deals by truckers (like the folks in the River Valley Sands deal) might want to think again about the motivations of your new good friends who want to help you make lots of money.  While they’re offering you $1/ton for your sand, they are going to make up to $10/ton trucking that sand of yours to a rail spur.  Oh, and their revenue will be inflation-adjusted, while yours won’t.  So the deal works better for them in 20 years, while it’s a lot worse for you.

And for you people who think Glacier Sands is going to give up on that project by the CFC School, this is also the reason they’re not.   They want to turn that piece of land into something that can compete with the port of Winona for frac sand traffic.  I’m still puzzled by all the long/expensive trucking runs from the mines they want to feed that plant with — maybe they’re hoping they can flip the package deal of sand mines and processing plant to a a greater fool who doesn’t understand the impact of trucking costs on the price competitiveness of this commodity product.

Click HERE to read the article.  And here’s the tasty bit that I’m using to come up with the $10/ton figure:

Christianson said many of the richest sand deposits in southeastern Minnesota fall too far away from existing rail lines to be readily developed. While frac sand companies in Wisconsin sometimes truck their product as far as 60 miles to reach rail or barge terminals, shipping directly by rail can save frac sand producers as much as $10 per ton, according to a Sept. 14, 2012, Raymond James report.

That gives frac sand producers in rail-connected cities like Shakopee, Minn., or Taylor, Wis., a competitive advantage.

“You can only truck sand a certain distance before it’s not cost effective,” said Martin Lehman, a spokesman for Berlin, Wis.-based Badger Mining Corp., which has operations on a Canadian National rail line in Taylor.

By the way, Raymond James is the real deal — a great big Wall Street firm that pays attention to the details.  So that $10/ton number is one that I would tend to trust.


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